CMMS / Maintenance Management Software - Benefits, Calculating Return On Investment (ROI)

Experts say that computerized maintenance management software (CMMS software) can help organizations save between 5-15% of their maintenance budgets. So even those with maintenance teams as small as one or two people should benefit from using CMMS software.  To help you prepare your justification for purchasing a maintenance management program the following example may help you calculate the benefits & ROI of a maintenance software program in your situation.

    ABC Corp. is a small company that manufactures widgets. It has a two person maintenance team. Some of the ways that maintenance software helps them are:

1. Reductions in equipment breakdowns: ABC Corp. has a packing machine that needs a weekly safety inspection and monthly bearing replacement. Due to very busy days at the plant, and that one of the maintenance people was out sick, the monthly bearing replacement task is not done.
   
       A few weeks later the packing machine breaks down unexpectedly due to bearing failure. It will take a day to fix. To meet client deadlines ABC Corp. has to hire four temporary workers for two shifts to pack the widgets. Each worker has to be paid $8/ hour. This works out to a cost of $512 ($8/hour X 4 workers X 16 hours). Plus there is the cost of any extra work and parts required to fix the broken packing machine.
   
       Assuming missed maintenance causes two events like this every year, it costs ABC Corp. about $1024/year or more due to equipment breakdowns that could have been avoided. With maintenance management software it would be easy to schedule the task at a better time. When creating the weekly/ daily plan or reviewing the workload for the period it would have been easy to see that there was a conflict since someone needed for the task was out. Even if it was not caught at the planning stage, it would have been identified as as a pending task once it was missed.
   
   
2. Reductions in overtime costs: Due to difficulties in scheduling maintenance just using pencil and paper or spreadsheets, the two maintenance people at ABC Corp. average six hours of overtime a week.
   
       With a maintenance management software program, ABC Corp. can better schedule maintenance work and finds that it can reduce overtime by a third. Assuming both maintenance people need to be paid overtime and their rate is $10/hour ($15/hour overtime rate) this translates to a yearly savings of $1040 ($5/hour extra for overtime X 2 people X 2 hours saved/ week X 52 weeks).
   
   
3. Longer asset/ machine life: ABC Corp. owns two trucks that need regular maintenance. These maintenance tasks are missed sometimes and result in the trucks requiring to be replaced earlier than expected due to premature failures. Each truck costs $50,000 to replace and has a usable life of ten years. Assume that missed maintenance reduces the truck's usable life to nine years (10% reduction in lifespan). This results in an additional capital cost of $10,000 (assuming $5,000 depreciation on each truck per year). This is an extra cost of $1,000 per year over the life of the trucks. With a maintenance software program it will be easier to schedule & track the maintenance needs of the trucks.
   
   
4. Better inventory management: ABC Corp. spends about $50,000 a year on parts required for equipment maintenance needs. With a maintenance software program they can better track inventory, when to restock items and quickly identify parts that are no longer required (because the equipment is retired). ABC Corp. finds out how many parts of each type they need for preventive maintenance tasks for each quarter by using work order planning reports to calculate parts and quantities needed. This helps them apply for volume discounts as they know how many they will need in advance. They also need to keep less inventory on hand because the CMMS software program warns them when each different part falls below reorder levels.
   
       Experts say that organizations can save between 5-10% on their yearly inventory costs with CMMS software (maintenance software). This translates to a savings of at least $2,500 a year for ABC Corp.
   
   
5. Other benefits: ABC Corp. finds that using a CMMS software program gives them improved control over their preventive maintenance schedule. They have better statistics on their maintenance needs as well as information on failure trends.
   
       For example ABC Corp. analyses the work order reports produced by the maintenance software program and finds that whenever Tom does maintenance on a machine it seems to break down more frequently compared to when Jack does the work. Checking with both of them they find that Tom did not realize that a washer needed to be replaced when maintenance was done. 
   
       A maintenance software program can help establish and record best practices in the instructions that can be printed on work orders for different maintenance tasks. ABC Corp. also find the maintenance reports that the maintenance management software program creates are useful to get certification and comply with local health and safety standards. Not performing certain mandatory maintenance safety checks & tasks on time can result in big fines from local authorities.
   
   

Payback Period: We can see that ABC Corp. get several benefits from using a maintenance software program. The potential yearly savings add up to over $5,500 a year plus the other benefits mentioned. Assuming ABC Corp. bought a copy of FastMaint CMMS Software Standard edition (single user) this is a payback period of a less than three months. If they bought FastMaint CMMS Software Professional edition (five user) this is a payback period of less than six months. This falls well within recommended guidelines of payback in a year or less for most projects.

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